HSBC tests cash machines in Athens for drachmas

HSBC has tested its cash machines in Greece to check whether they could cope with the reintroduction of the drachma if the country drops out of the euro.

It is the clearest sign yet that the international financial sector believes Greece is on the brink of quitting the single currency and returning to its former currency.

An HSBC spokesman said: ‘Like all banks, we have been working with regulators to undertake preparatory work at multiple levels in the event of a sovereign default, an exit from the euro, or any other eventuality.’

Running tests: HSBC has checked whether its ATMs are able to handle banknotes of a different size and texture

Greece faces an election on June 17 that is widely regarded as a vote on whether to stick with the euro.

Banking sources noted that it was the
fear that Royal Bank of Scotland customers would not be able to
withdraw their money from ATMs that marked the high point of the
financial crisis in Britain in 2008 when the Government intervened to
prop up RBS and the rest of the banking sector.

The cash machine tests at branches in
Athens are understood to have been extensive to ensure that the machines
are able to handle banknotes of a different size and texture.

In a further indication that the
situation in Athens is reaching dramatic levels, the European Commission
has made it easier for Britain to underwrite business risk taken by
firms that export to Greece.

This comes amid growing concern about the impact of the worsening eurozone crisis on businesses and trade.

Credit insurer Euler Hermes last week
revealed that it was suspending cover for new export contracts to
Greece, though it will continue to honour existing contracts.

This was followed by credit insurers Atradius and Coface announcing a similar policy.

The EC has now lifted restrictions
that previously banned countries from providing state insurance cover
for exports to European Union countries where the contract was for less
than two years.

It said in a statement that the
decision was taken because of the ‘exceptional economic disturbance to
the Greek economy and the scarcity of private insurance cover for
exports to Greece’.

This means that individual EU
governments can step into the breach and provide some security for firms
exporting to Greece. However, the minimum value of contract that
Britain’s UK Export Finance department will provide cover for is
£20,000, which means many smaller firms may still find they have little
or no protection in place.

A spokesman for UK Export Finance
said: ‘Credit insurance applications can be made to UK Export Finance in
respect of cover for exports to Greece. Cover is granted on a
case-by-case basis.’

HSBC, meanwhile, has been acting at
the behest of Britain’s Financial Services Authority, which has asked
banks to examine their exposure to risks associated with the eurozone.